Pay with a wave of your hand?

MSN Money (Link) - creditcards.com - Jay MacDonald  (September 11, 2009)

An implantable chip could allow you to charge purchases or even start your car. It'd be convenient, to be sure. But would it be too creepy?

It's a simple concept, really: You inject a miniature radio frequency identifier the size of a grain of rice between your thumb and forefinger and, with a wave of your hand, unlock doors, turn on lights, start your car or pay for your drinks at an ultrachic nightspot.

The problem is, the whole concept is a little geeky for most of us, nauseating for some, Orwellian for a few and even apocalyptic for a smattering of religious fundamentalists.

Forget the science of it -- and yes, it does work remarkably well. Forget the convenience of it. Forget that similar identifying technologies, from bar codes to mag stripes, overcame similar obstacles and are now ubiquitous.

Radio frequency ID implants face a hurdle the others did not: ickiness.

"There is sort of an icky quality to implanting something," says Rome Jette, the vice president for smart cards at Versatile Card Technology, a Downers Grove, Ill., card manufacturer that ships 1.5 billion cards worldwide a year.

How RFID devices work

The RFID technology is un-yucky, however. The implanted tag -- a passive RFID device consisting of a miniature antenna and chip containing a 16-digit identification number -- is scanned by an RFID reader. Once verified, the number is used to unlock a database file, be it a medical record or payment information. Depending upon the application, a reader may verify tags at a distance of 4 inches up to about 30 feet.

The RFID implant has been around for more than 20 years. In its earliest iteration, it provided a convenient way to keep track of dogs, cats and prized racehorses. Few took note or voiced much concern.

Then, in 2002, Applied Digital Solutions (now Digital Angel) of Delray Beach, Fla., deployed to its foreign distributors a beta version of its patented VeriChip technology for human use. Two years later, the VeriChip became the first subcutaneous RFID chip to receive FDA approval as a Class 2 medical device.

One VeriChip distributor in Spain sold the concept to the ultratrendy Baja Beach Club, which offered its patrons in Barcelona and Amsterdam the option of having an implant inserted in their upper arms to pay for their drinks without having to carry wallets in their swimsuits.

Judging by the ensuing outrage, you would think VeriChip had given the pope a wedgie.

'Mark of the beast'?

Web sites sprouted like mushrooms, accusing VeriChip of being the biblical "mark of the beast" predicted in the Book of Revelations as a foreshadowing of the end of the world.

CEO Scott Silverman was equally vilified as being tied to Satan or, worse, Wall Street. Big Brother was surely coming, though he'd have to get pretty close to read your implant. Claims that the tags cause cancer based on lab rat tests upped the amps of outrage.

Were people suddenly curious about RFID implants?

"Curiosity is probably an understatement," Silverman concedes. "People have always taken interest in VeriChip. Part of the lore and part of the trouble of this company over the past five years has been just that."

Though VeriChip played no part in using its implant as a payment device, the company quickly moved to calmer waters. Today, it markets its VeriMed Health Link patient identification system to help hospitals treat noncommunicative patients in an emergency. Its future may include more advanced medical applications, including a biosensor system to detect glucose levels.

"A lot of the negative press that we received was a direct result of people having a misconception of what this technology is all about," says Silverman. "We believe that the medical application was and still is the best application for this technology.

"That said, if and when it does become mainstream and more patients are utilizing it for their medical records or for diagnostic purposes, if they want to elect to use it for other applications, certainly they'll be able to do that. But it's going to take a company much larger than us to distribute the retail reader end of it into the Wal-Marts of the world."

Versatile's Jette has watched contactless RFID battle for acceptance in the credit card arena. Just as Silverman suggests, the dynamics and scale of the payment industry tends to work against widespread deployment.

"Mobil Speedpass tried to do it; they got some traction and decided to see if there was any mileage to take this to a Walgreens or McDonald's. You used to be able to use your Speedpass at McDonalds, but that ended because, at the end of the day, you still only have two gigantic payment processors out there, Visa and MasterCard," he says. "To me, the idea of any kind of payment device having ubiquity requires an awful lot of back-end cooperation, of people willing to say, 'I don't need my brand in the customer's wallet.'"

Although the coolness factor is effective from a marketing standpoint -- American Express Blue with its smart (if largely unused) chip is a good example -- Jette says most cardholders would balk at the very thought of a needle.

"With the implanting in the nightclubs, there is a cache of exclusivity there, especially among a certain demographic where people are piercing themselves and getting tattoos. But those are things that really only 20-somethings do a lot. I really doubt that there will be any market for injectable RFID tags or even any single point-of-sale payment device."

"A lot of times, the technology is a solution looking for a problem. Sometimes people fall in love with the technology for its own sake and then try to evangelize a home for it. My business group is just smart cards, and I never forget that although we make money with smart cards, the bills are paid with mag stripe cards. As backwards and old-fashioned as they are, that is still the bulk of what the transactions are going to be in America for a very long time."